Wednesday, February 25, 2009

Mortgage Interest Deductions and the American Dream

I've been reading Ezra Klein's recent essays on health reform and Social Security. He's got press credentials to the White House (or something), and it looks like he's getting e-mails or policy memos from West Wing staffers. I'll have more on Klein's stuff in a later post on entitlement reform (note for now that the left wants to increase benefits and raise taxes to "reform" the system).

In any case, Edward Glaeser, at the New York Times, is
making the case for the elimination of the mortgage interest deduction for homeowners. This deduction has been a staple of homeownership in the United States for nearly a hundred years. Owning one's home is generally considered the single most important means for the average family to accrue wealth. It's part of the American dream and a crucial element of the American political culture of individualism (think of the 19th century rugged individualism of the American Frontier). The tax benefits of owning a home encourage and sustain personal liberty. Perhaps for these very reasons we're seeing Ezra Klein (who is joined by Duncan Black) literally jumping for joy at the serious discussion and mere possibility of the mortgage interest deduction. (You can check the link to Klein's post, but for an uproarious diversion, see this one on the outing of Duncan Black as a homosexual, with funny pictures!)

So, more later on this, but the meantime, here's
Neptunus Lex with more on the political culture of homeownership:

I’m one of those hundreds of millions of Americans who bought a house, continues to pay my mortgage on time - in an exceptionally high cost area - and has no intention of walking away from an obligation I made in good faith. Knowing, as my parents’ generation taught us, that home ownership was the principal path towards middle class wealth generation. That home is - generally - the best investment the average schmoe can make. It’s a chance to have a slice of the American dream, take a little out to send your kids to college, and maybe leave a bit behind when you walk into the clearing at the end of the path. When you’ve paid it off free and clear it’s your very own. No landlords to pay wrack rates to. No permanent ruling class ....

If there’s no tax advantage to participating in the dream, many more folks might choose to rent rather than own. In an economy that is suffering because housing values are worth less than the debt obligated, many millions more would choose to walk away. The financial crisis generated by trillions of un-anchored debt will multiply manifold times. Wealth will aggregate in the pockets of those who are already wealthy, and the rest of us will leave nothing much behind us when we leave than cost of cleaning the flat they find our corpses in.

Which will leave our children as perfect wards of an all-powerful, beneficent state. A state that knows what’s best for you. A state that makes your choices for you. A state that will take from those, according to their ability, in order to provide to those,
according to their need.


Norm said...

So in other words the Democrats won't increase our taxes, just take away our deductions. What a great idea !

This idea has been around for a long, long time. If any politician wishes to lose an election he/she should promote this idea. It won't be the first time that Congress has passed legislation that hurt our real estate values. In 1987 they
took away deducting interest on most investment properties; and by
1993 my house lost 33% of its value. But the idiots in Congress have very short memories.

Anonymous said...

This new new policy will evict my family from my home!!!. We are a middle class family living pay check to pay check - and by the way paying all of bills on time. By enacting this policy you we throw me and millions of household on to the street who are no longer able to meet their obligations. When we purchased our house this year and we did the responsible thing and budgeted our purchase accordingly, factoring in the tax deduction. Now you want to pull the rug from underneath us. We are a hard working family ( making a $100,000 total family income with two child) and want our country to prosper but adding an addition $800-$1000 to our monthly budget as result of this new policy is lonacy Will someone please explain to me how throwing a million middle class household out onto the street and increasing the supply of homes for sale going to help to pull our economy out of this morass.

-V DiNardo

Anonymous said...

eliminating intrest rate deductions on any homes, fist, second, third, etc. will push housing prices down an extra 30% on average. Now what will that do for us all???? Time to prepare for class warefare! I don't have a machine gun yet but it might be the prudent thing to do the way we ar heading with all thse fixes all at once.